Prime Minister Imran Khan has convened a meeting of the federal cabinet tomorrow in which the mini-budget will be approved.
A mini budget that includes the IMF’s strictest conditions, which are likely to make electricity and petrol more expensive.
The IMF had imposed strict conditions on Pakistan before releasing more than Rs1 billion in installments, under which the government would have to abolish tax exemptions of Rs. 350 billion, or in other words, new taxes will be collected.
Money budget suggestions
- An increase of Rs. 270 billion is expected in the money budget.
- The target of tax collection will be increased to Rs. 6100 billion.
- The sales tax rate is likely to be raised to 17 percent.
- Tax rates on various types of goods can increase from 5 to 7 percent.
- It is possible to increase the levy on petrol by Rs. 4 per liter per month to Rs. 30 per month.
- It is proposed to give the power to increase or decrease the Petroleum Development Levy to the Prime Minister.
- There will be a reduction of Rs. 200 billion in the development budget.
- The proposal to increase the tax rate on vehicles larger than 800cc is also part of the amendment bill.
- Exports and capital machinery items will be eliminated from zero rates and will be included in sales tax items.
- Supply and import of construction materials, equipment, and machinery will be exempted.
Increase in taxes
- Money budget will tax more than 1700 items.
- Imports of luxury items will also be taxed.
- Federal excise duty on vehicles is expected to increase by 2.5 percent and sales tax on tractors by 5 percent.
- Imported clothes, perfume, and shoes will be expensive.
- Tax exemptions on stationery and packaged food items are likely to be abolished.
- Tax rates on mobile phones, cosmetics, imported food, refineries are likely to be increased.
- Imports of foreign vehicles may be banned.
- Advance tax will be levied on imported dramas.
- It is proposed to continue the concession given to the real estate sector.
- The powers of the FBR Collector are being curtailed by amending the Customs, Sales Tax, and Income Tax laws.
The government says that the money budget will not burden the people with inflation while the opposition says that if the money budget is passed then the year 2022 will be the worst year for the people while it is seen that inflation in Pakistan is at its peak.
Other items including electricity, petrol, LPG, firewood, sugar, pulses, flour, ghee, cooking oil, tomatoes, eggs, meat, fresh milk, and yogurt have become more expensive. According to the Bureau of Statistics, the overall inflation rate in the country has reached 19.83 percent. For the lowest income earners this month, the inflation rate was 21.92 percent.
According to economists, the government is playing with words in the mini-budget. Experts say that the abolition of tax exemption is also tantamount to the imposition of tax because the items on which the tax exemption will be abolished will definitely become more expensive which will have to be borne by the people which will cause more difficulties to the people.